Dealing With a Property Subject to Covenants, Conditions and Restrictions

Parcels of real estate can be subject to varying degrees of restrictions. Whether it is a house in a subdivision governed by a homeowners association, or a property governed by certain covenants or restrictions, the property owner takes ownership subject to these restrictions and the associations that enforce them. This power allowed a commercial complex’s governing association to secure a victory in the 3d District Court of Appeal and defeat one owner’s attempt to convert his units to residential spaces, since the association’s restrictions were within their power and were not arbitrary or made in bad faith.

Luani Plaza was a Key West commercial complex resembling a strip mall, which contained a shopping center and professional offices. Each unit in the complex was owned individually, but each owner was bound by a Declaration of Covenants, Conditions and Restrictions, and each owner was also a member of the complex’s business owners association, Luani Plaza, Inc. Michael Burton, a family practice physician who owned two of the units, went to the association seeking permission to build dormers on the second floor of his units to create storage space. The association neither approved nor denied the doctor’s request, instead stating that it needed more information to reach a conclusion.

From this point, the relationship between the sides deteriorated. Burton built the dormers without permission and later obtained permit approval from the city to make each unit’s second floor a residential space. The association demanded that he stop, but the doctor continued with the residential conversion. While this was going on, the association amended the declaration document to ban residential use in 2008. The association later sued the doctor, seeking an injunction to prevent the residential conversion.

The association argued that the conversion was incompatible with the plaza’s use and that the conversion increased the cost of liability insurance for the plaza. The trial court, however, sided with the doctor, green-lighting the conversion project.

On appeal, though, the project hit a road block. The appeals court concluded that the association had the right to bar Burton’s conversion. The amendment to the declaration, which prohibited residential use, was valid and enforceable against Burton. The amendment needed only to be arbitrary and not made in bad faith. In other words, the association needed a reasonable basis for making the amendment. The appeals court concluded that the amendment met this reasonableness test, given the plaza’s history. The plaza was designed as a commercial space and had been used solely for commercial purposes during its entire 20-year existence.

Burton also challenged the amendment as an impermissible retroactive regulation. This argument did not succeed, though, since the association passed the amendment early in 2008, shortly after learning of the doctor’s intentions, and Burton did not obtain the required certificate of occupancy needed for residential spaces until two years later. The doctor pursued his renovation, at all times, with complete awareness that the units could not be used for residential purposes, so the trial court was in error in finding the declaration amendment unenforceable against Burton and his residential space project.

Any time you buy, or consider buying, real estate that is subject to covenants or conditions, it is important that you have a clear and thorough understanding of what these restrictions mean for you. For knowledgeable and helpful advice and representation, get in touch with the Florida real estate attorneys at Stok Folk + Kon. Our attorneys can help you understand your rights and your obligations so that you can make an informed decision about the piece of real estate you are considering.

Contact us online or by calling (305) 935-4440 to schedule your consultation.